Business
Decisioning platforms can springboard ESG in financial services
Published
3 weeks agoon
By
admin
Matt Cox, Vice President, FICO looks at how businesses need to back up ESG credentials with flexible systems that enable rapid ingestion of data sets
The implementation of ESG measures in the UK and across the world faced challenges last year, but that did not stop organizations hijacking the title and splashing it across their propositions in an attempt to market themselves in a positive light.
It’s clear why this happens. For example, in a world where there’s a significant skills gap, environmental and social considerations can be a decider between a prospective employee accepting or rejecting an offer. Customer choice and loyalty can also be swayed by ESG credentials. At the same time, the spreading of disclosure requirements is driving investors in shaping organizations’ attitude to strategically embrace a sustainable profile. However, most recent reports highlight how only 5% of European firms have credible decarbonization plans in place.[i] Over-inflated claims have developed to the point where the FCA set out new rules to establish the UK as a leader in anti-greenwashing[ii]. The rules target exaggerated or misleading claims around environmental credentials.
Decisioning platforms to propel ESG efforts
In financial services, much of the ESG agenda today is delivered at the corporate level and will address subjects like where the bank invests. While ESG strategic commitments and policy frameworks have been fine-tuned at that level, and new type of sustainable finance products have been brought to market, much work is still needed to connect and optimise the operating framework in between. The latest CDP – Oliver Wyman report shows that, with respect to transition to a low-carbon economy (a subset of ESG), 70-80% of organizations are still lacking a sound governance structure to execute their strategic commitments.[iii]
Forecasts show that while 2022 was a difficult year for ESG efforts, a change is coming and there will be an increased focus on bringing ESG insight into more granular lending and investment decisions. This will include:
- Implementing policies and decision-making criteria in line with specific environmental objectives.
Integrating environmental objectives into customer engagement strategies to support and encourage the sustainability transition of clients, in order to reduce indirect emissions (those coming from the business model and external stakeholders rather than internal operations).
This will trigger a need for flexible decisioning platforms that allow new data sets to be quickly loaded and assessed.
Many leading banks now have active climate change programmes and begun equipping themselves with tactical toolkits. This isn’t a side project for them, it’s integral to their mission. And it’s made possible in part by digital transformation projects.
An environmentally focused organization is also important to the next wave of customers, where more than 50% of them is already expecting to embrace a sustainability-conscious lifestyle[iv]. Today’s youth will not bank with any organization that cannot handle all their needs digitally and showcase the right sustainability credentials. Your future customers are paying attention. Financial institutions will need to adapt to better serve the environment in the years ahead and they need to consider what tools they will use to fulfil those plans.
For ESG programmes to hit their targets and make a difference where it is needed, there must be increased innovation in the use of alternative data across all kinds of lending. This data will include everything from satellite-driven CO2 emission detections (needed to assess and report on indirect, financed emissions) to assessing the changing number of rainy days across regions to the effect of changing behaviour of climate systems (in order to assess and model the risk of physical climate risks affecting both their own facilities and portfolio assets). While such dara are needed for disclosure, they can also be factored into the management of customer relationships, potentially affecting onboarding, pricing, marketing or advisory engagements.
As a result, organisations will increasingly need flexible data (adding more than 500 data points to traditional analysis) and decisioning platforms that enable these new data sets to be ingested, assessed rapidly for their validity and then deployed into decision-making processes.
We have seen banks rushing to cover immediate needs, for example assessing the policy alignment of properties backing mortgages or the ESG profiles of specific firms. But standalone and partial views, rarely built internally, of ESG-related risks harms the proper understanding and management of those integrated risk metrics that financial institutions are required to disclose, explain and address in their business model.
Using decision technology to address environmental issues
It’s difficult to associate debt collection with saving the planet. But one of FICO’s European customers, Hoist Finance is making that connection. Hoist used to manage customers using 14 different systems. Now they use one – FICO Platform.
Hoist have massively digitized their operations as a result, and have calculated that they save 442 tons of carbon for each 10% of customers using the automated process. This reduces the organization’s carbon footprint for every digital resolution by 97%.
In addition to cases like this where financial services firms are directly addressing their carbon footprint, there are also opportunities for banks to support their business customers’ sustainability journeys. It is helpful, therefore, to see how firms operating in various sectors such as logistics and renewable energy are using decision technology to reach ESG goals.
Mexico’s Traxión, the leading mobility and logistics company in Mexico, has used FICO route optimization technology to help it use fewer vehicles, save on fuel costs, cut emissions and reduce fleet wear and tear. The company has already saved 2.9 million kilometres in travel, USD$725,000 in costs and 458 metric tons of emissions after implementing just 11% of the optimal solution. Traxión is on track to reduce empty trips by 20 percent which will save it more than 10 million kilometres, USD$2.5M in costs and an impressive 1,580 metric tons of emissions once its operations are fully optimized.
Denmark’s Ørsted, the world’s leading offshore wind farm developer, has used FICO® Xpress Optimization to develop a novel digital solution for designing an important part of their wind farms. This has enabled the Danish company, which has 30 wind farms in operation or under construction, to achieve significant savings while reducing overall design time and improving its ability to investigate different scenarios. This allows Ørsted to roll out wind farms faster than they could before.
Playing a role in implementing ESG-focused principles is about more than just keeping up with legislation. It is essential to evoke a sense of responsibility as change needs to happen quickly; ESG ties everyone together.
[i] https://www.oliverwyman.com/content/dam/oliver-wyman/v2/publications/2023/feb/cdp-europe-report.pdf
[ii] https://www.cityam.com/fcas-new-sustainability-rules-to-establish-uk-as-world-leader-on-anti-greenwashing/
[iii] https://www.oliverwyman.com/content/dam/oliver-wyman/v2/publications/2023/feb/cdp-europe-report.pdf
[iv] https://www.simon-kucher.com/sites/default/files/studies/Simon-Kucher_Global_Sustainability_Study_2021.pdf
Business
How to identify the signs that your IT department need restructuring
Published
2 days agoon
March 29, 2023By
editorial
Eric Lefebvre, Chief Technology Officer at Sovos
For firms to execute transformations and meet their overall vision, it is crucial that their CIOs are able to recognise the signs that their department is in need of some internal change. In the current economic climate, CIOs working to fulfil their organisation’s priorities and meet business goals might hesitate to acknowledge that their IT department needs restructuring, never mind be able to identify the signs.
However, these problems rarely fix themselves and organisational restructuring requires conviction and determination from leadership for it to occur successfully. So, what are some of the key signs that CIOs should look out for?

Eric Lefebvre
Struggling to keep up with industry demands
CIOs unsurprisingly are working in an extremely demanding environment at the moment. Meeting these evolving demands is crucial for companies. When demands are not met and not handled properly, this can have a lasting impact on organisational goals and objectives, and even impact the way in which transformations are put into effect.
Depending on the organisation’s structure, the way in which being unable to keep up with demands manifests itself can differ. Despite double digit reductions across the industry, the search for talent across the tech world continues, project costs continue to rise as the cost of labour has increased and schedules have been disrupted by significant attrition. Many companies will also find business costs, such as that of third-party software, are higher than planned and technology debt continues to pile up faster than it can be sunset.
Whilst leadership teams might dedicate their department’s attention on the factors discussed above, they may find that their team will fall short when it comes to timely deliverables and helping maintain your organisation’s tech stack and guide its business transformations. Looking beyond the immediate problems of high costs and considering an internal reshuffle may be the solution for many IT departments.
Internal conflict within the team
Organisational designs with underlying issues can cause constant friction, especially when they go unacknowledged. An IT department that lives in conflict will certainly be reflected in results and less than successful tech transformations. CIOs will find that by adopting an organisational design which works through staffing issues, will better innovate, especially if they can all work together.
Department leads should have a strong understanding of their team’s work environment and guide them through any long-term or potential problems. When an individual is working in a demanding or complex industry, working well with your team shouldn’t be the main impediment to innovation. By acting quickly to eliminate internal conflict, CIOs can better lead and ensure their team’s focus is entirely on producing more optimal outcomes.
Delays are commonplace
When a large amount of your team’s time is spent setting objectives, budgets and timelines for the projects they are working on, it is vital that they are met. When delays are coming from the IT department, they will inevitably hinder the development of any business transformation, especially if it prompts teams to spend excessive amounts of time rearranging budgets and timelines and therefore hindering innovation.
IT departments are a crucial aspect in many different parts of a company’s transformations, so remaining on track when it comes to timelines and innovation is critical to operational plans. If delays have become commonplace in an IT team, and external factors are impacting projects, CIOs should look at restructuring an IT department to solve these issues.
The strongest team relationships do not happen by accident and are the result of good planning, strong leadership and a motivated team. CIOs can ensure this by providing vision and long-term strategy with clear goals and objectives to produce high levels of quality output.
When internal issues are noticed in an IT department, and are noticeably impacting team morale or productivity, this should indicate the need for departmental restructuring. Be that due to an inability to meet market demands, issues with productivity and meeting deadlines or internal conflict, these issues all risk a department’s functionality and an organisation’s ability to achieve its goals. In short, don’t overlook the warning signs!
Banking
Top banking trends of 2023 and global outlook of banking and fintech for the year ahead
Published
2 days agoon
March 28, 2023By
editorial
Author: Professor Marco Mongiello, Pro Vice-Chancellor, The University of Law Business School
You’d be forgiven for assuming that the global outlook for banking and fintech will be dominated by the usual suspects:
Artificial Intelligence – AI plays an increasingly prominent role in banking and fintech by enabling personalised services, fraud detection, predictive analytics, use of chatbots and robo-advisors.
Blockchain and Cryptocurrency – the secure, decentralised and swift system for financial transactions that blockchain has brought to the fore a few years ago, is now becoming ubiquitous. An increasing number of transactions are recorded through blockchains technology, primarily in the cryptocurrency market.
Digital Banking and fintech – accelerated by COVID-19 pandemic, the adoption of digital banking is a trend that will persist as customers have become accustomed to the convenience and efficiency of digital banking. Moreover, fintech enables access to financial services for previously underserved populations in developing countries or less affluent social groups in more affluent societies. This includes mobile banking services, peer-to-peer lending platforms, and microfinance solutions.
Open Banking – another global trend is the use of open APIs (Application Programming Interfaces) that allow third-party developers to build apps to facilitate customers’ access to financial data and services from banks.
Nonetheless, the challenges posed by these rapid changes are reminders that banking, an industry that by its very nature needs to be conservative, risk averse and solid, wobbles on the unchartered grounds of fast and turbulent innovation, where entrepreneurship instead thrives. The underlying rationales of banking and fast digital innovation are not incompatible but do need solid operations and thought-through decision-making to avoid causing catastrophic collapses.
The recent examples of Silicon Valley Bank, Silvergate, FTX and Wirecard are stark reminders that digital entrepreneurship applied to banking doesn’t just bring to customers the visible transformation of valuable new services, but also dents (perhaps as an unexpected consequence) the rationale itself of the role of banks in the global economy. Moreover, the central banks’ ability to contain the effects of single banks’ defaults is no longer a certainty, as experienced just over a decade ago and more recently. The markets’ sentiments are hardly reassured by the commitments of even the most coveted players, such as the European Central Bank, the Federal Reserve, and the President of the United States himself.
Regulators are lagging behind and their attempts to catch up may cause further seismic shocks to the global banking system. For example, another trend that is emerging is one of artificial intelligence decision-centres (i.e., decentralised offices of banks which take autonomous decisions on behalf of investors) outside the most stringent regulatory environments, enabling banks to operate globally more efficiently and more competitively. And we can expect that regulators will close the gap either abruptly, as it is currently happening in China, where private banks are subject to an escalation of regulatory and monitoring restrictions, or more gradually as it is happening in Europe and in the US.
The questions we face, as individual or trade customers of our high street banks, as direct investors or clients of managed funds, are whether banking will become more user-friendly yet, for our daily use but riskier, too, or is it simply becoming more efficient, transparent and also safer.
I’m afraid that the answer is by no means an obvious one. Therefore, caution, level-headed decision- making and critical thinking have never been as important as these days. Whether you are looking after your family savings or growing your pension reserve, the imperative is that you keep updated about the providers of the financial services you rely upon as well as about the general regulations that apply to your financial transactions. This is where, for example, you need to be familiar with your rights in case of cyber fraud, as well as learning how to minimise the risk of becoming a victim thereof. Also, taking additional steps to evaluate the credibility, solidity and reliability of the online provider of that app that was recommended by a trusted friend, may prove a very good move.
Similarly, whether you are the CFO of a medium or large company, or are a sole trader wrestling with your own business’s finances, you need to reflect on what you really want from your bank in the first place. That is before you started to be swayed by the whirlpool of offers of ‘opportunities’ to multiply your financial investments. Chances are that your initial approach to your bank was dictated by either a need for financing your working capital, as per your budget and strategic plans, or to find a safe place for your temporarily idle liquidity. Perhaps you were also after some basic treasury services such as swift payments and debt collection. Maybe some other financial services closely related to your business operations, e.g. factoring. The advice is to give very careful consideration to services that are more remote from your business, because the trend for the next years is that more and more of those will be offered to you. But many new services will disappoint those who, sadly, cannot afford financial mishaps as they look to run and grow their business.
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